The freezing of all security assistance to Pakistan comes days after President Donald Trump in a new year tweet accused Pakistan of giving nothing to the US but "lies and deceit" and providing "safe haven" to terrorists in return for $33 billion aid over the last 15 years.
Prominent among the suspended amount includes $255 million in Foreign Military Funding (FMF) for the fiscal year 2016 as mandated by the Congress.
In addition, the Department of Defense has suspended the entire $900 million of the Coalition Support Fund (CSF) money to Pakistan for the fiscal year 2017.
"Today we can confirm that we are suspending national security assistance only, to Pakistan at this time until the Pakistani government takes decisive action against groups, including the Afghan Taliban and the Haqqani Network. We consider them to be destabilising the region and also targeting US personnel. The US will suspend that kind of security assistance to Pakistan," State Department Spokesperson Heather Nauert told reporters.
The US, she said, will not be delivering military equipment or transfer security-related funds to Pakistan unless it is required by law.
Referring to the new South Asia Policy announced by Trump in August, Nauert said despite a sustained high-level engagement by this administration with the government of Pakistan, the Taliban and the Haqqani Network continue to find sanctuary inside Pakistan as they plot to destabilise Afghanistan and also attack the US and allied personnel.
Department of Defense Spokesperson Lt Col Mike Andrews told PTI that National Defense Authorisation Act 2017 provides up to $900 million for Pakistan in CSF.
Of these funds, $400 million can only be released if the Secretary of Defense Jim Mattis certifies that the Pakistan government has taken specific actions against the Haqqani Network.
"At this stage all Fiscal Year 17 CSF have been suspended, so that's the entire amount of $900 million," Andrews said.
During an interaction with Pentagon reporters, Defense Secretary Jim Mattis did not respond to question if he was in favour of cutting off the aid to Pakistan.
"I prefer not to address that right now because it's obviously still being formulated as policy. But I'll give my advice on it to the president. I also agree on some confidentiality there," he said.
According to a senior State Department official, no decision has been taken on the fate of $255 million security assistance to Pakistan for the fiscal year 2017.
The deadline for that is September 30 this year.
Mattis along with the Secretary of State Rex Tillerson has traveled to Pakistan in recent months to deliver a tough message to their leadership. So, this action should not come as a surprise to them, Nauert said.
"They may say it's a surprise, but what is no surprise is that the President has expressed his concerns, Secretary Tillerson has expressed his concerns, as has Secretary Mattis, and I imagine many other government officials having those conversations with Pakistan," Nauert said.
Now, the money that has been suspended at this time does not mean that it will be suspended forever, she said.
"Pakistan has the ability to get this money back, in the future, but they have to take decisive action. They have to take decisive steps," she added.
"People have long asked, why don't you do more about Pakistan, and I think this sort of answers that question. Obviously, Pakistan is important, an important relationship to the US, because together we can work hard to combat terrorism. Perhaps no other country has suffered more from terrorism than Pakistan and many other countries in that part of the region," she said.
"They understand that, but still they aren't taking the steps that they need to take in order to fight terrorism," she said.
In an interaction with reporters, two senior state department officials asserted that such a move is not a punishment, but to provide an incentive to Pakistan to take more action against terrorist groups.
"We have not done anything that's irreversible here. All this funding is available to Pakistan, if they undertake to take the measures that we've asked of them," a senior administration official said in response to a question.
Noting that a country is going to react very differently to an irreversible step, the official hoped Pakistan would react differently that they would react to something which is reversible.
"Pakistanis have repeatedly said we don't care about this money. What matters I think to the Pakistani's is that it is the symbolism of doing this that it represents a deterioration of our relationship that they care about a great deal," the official said.
"So we were hoping that this is an incentive that they don't want to see this relationship deteriorate any further and that they're going to commit to working with us to try to find a way to put it on a more solid footing," the official added.
According to another senior administration official, as part of the latest decision, the US will now not deliver military equipment or transfer security-related funds to Pakistan unless required by law.
"Exceptions may be made on a case by case basis if they're determined to be critical for national security interests," the official said, adding that this suspension is not a permanent cut off at this time.
"Security assistance funding and pending deliveries will be frozen but not cancelled as we continue to hope Pakistan will take the decisive action against terrorists the militant groups that we seek," the official said, adding that the US does not intend to reprogram any funds at this time.
This suspension includes FMF 2016 ($255 million) as well as prior year FMF that has not yet been spent or delivered.
Final figures are still being calculated, said the official, who spoke on condition of anonymity.
The suspension also includes coalition support funds for Pakistan.
However, the suspension does not include US civilian assistance programs in Pakistan.
"Pakistan remains an important country in the region and in the world and has historically been a vital partner for the US," the official said.
The State Department official defended the decision not to suspend civilian assistance.
"We all have no reason to believe that civilian assistance represents any form of leverage. The elements of the Pakistani government that needs to take the steps that we're talking about are not touched by civilian assistance. So, it wouldn't make any sense to tie civilian assistance to those steps that we're asking for," the official said.
The US has been holding regular talks with Pakistan, the official said, adding that they do not believe that talks are an impasse as reported in some section of the media.
"We are having conversations on a weekly basis at senior levels with the Pakistanis. Our hope is not that they will see this as the end of the road," the official said.
"Our hope is that they will see this as a further indication of this administration's immense frustration with the trajectory of our relationship and that they need to be serious about taking the steps we asked in order to put it on a more solid footing," the State Department Official said.